INCOME TAXES

The provision for income taxes includes deferred taxes and is based upon estimated annual effective tax rates in the tax jurisdictions in which we operate. Such annualization of effective tax rates can cause distortion in quarterly tax rates.

Income tax expense related to continuing operations differs from the amounts computed by applying the U.S. federal income tax rate to income before income taxes. The reasons for these differences are as follows:



	13 Weeks Ended				39 Weeks Ended
(Percent of Income (Loss) Before Income Taxes)	June 29 2014		June 30 2013		June 29 2014		June 30 2013

Computed “expected” income tax expense (benefit)	(35.0	)	35.0		35.0		35.0
State income taxes (benefit), net of federal tax effect	(3.3	)	3.5		3.5		3.4
Dividends received deductions and credits	1.3		(8.4	)	(6.5	)	(5.9	)
Valuation allowance	—		(1.8	)	(15.4	)	4.2
Domestic production reduction	—		3.4		—		3.4
Resolution of tax matters	3.4		5.0		14.9		2.6
Deferred income tax rate adjustments	—		22.1		13.5		4.8
Other	(0.3	)	2.9		3.2		2.0
	(33.9	)	61.7		48.2		49.5

In connection with the refinancing of debt under the Chapter 11 Proceedings, we realized substantial cancellation of debt income (“CODI”) for income tax purposes. However, this income was not immediately taxable for U.S. income tax purposes because the CODI resulted from our reorganization under the U.S. Bankruptcy Code. For U.S. income tax reporting purposes, we are required to reduce certain tax attributes, including any net operating loss carryforwards, capital losses, tax credit carryforwards, and the tax basis in other assets in a total amount equal to the tax gain on the extinguishment of debt. As a result, in February 2012 we began recognizing additional interest expense deductions for income tax purposes. The 2014 Refinancing accelerated the recognition of the remaining additional interest expense deductions, significantly increasing the 2014 loss for income tax purposes. The reduction in the basis of certain assets also resulted in reduced depreciation and amortization expense for income tax purposes, beginning in 2013.